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Stocks are back near record highs once again.
Investors who didn’t panic sell through President Trump’s tariff-related comments this month have almost recouped all their losses, with the S&P 500 within half a percent of its all-time close from earlier this month.
And that includes last week’s regional bank scare.
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There are a few reasons why the minor sell-off that began with trade war threats on China has been erased:
- Promising developments for U.S.-China relations
- A wave of stronger-than-expected corporate earnings
- Investors’ realization that short-term noise won’t derail the structural bull market
As Opening Bell Daily readers know, a similar pattern unfolded during April’s Liberation Day sell-off.
Remember, the S&P 500 has endured two bear markets and two corrections since 2020.
And only one of those can be tied to an actual recession, which occurred at the start of a once-in-a-generation pandemic.
The economy has otherwise grown consistently over the last five years, and equities and earnings have strengthened in kind.
Here’s how veteran strategist Ed Yardeni, founder of Yardeni Research, explains it:
“Corrections tend to occur when investors fear a recession that doesn’t happen. Bear markets tend to be caused by recessions. Currently, the economy remains resilient, and a recession is unlikely, in our opinion.”
In effect, social media posts coming out of the White House — market-moving as they may be — do not exactly impact the structural tailwinds driving financial markets:
- Accelerating AI boom
- Falling recession odds
- Multiple expected Fed rate cuts
- Rising economic growth forecasts
Meanwhile, the government shutdown has delayed recent labor market data, leaving investors with one less potentially negative catalyst to trade off.
Indeed, recent headwinds in mind, the team at UBS Global Wealth Management maintains that the bull market is still intact.
“Investors should ensure they have adequate allocation to equities,” said UBS’ Ulrike Hoffmann-Burchardi, chief investment officer for the Americas and global head of equities.
